Financial arms race underway in Washington

When it comes to money in politics, the new normal is already on vivid display.

It could be seen last week in posh restaurants and corporate townhouses on Capitol Hill, where politicians held fundraisers at a record pace. It was evident at Washington's blue-chip law firms, where campaign finance lawyers began work setting up new political committees to collect unlimited donations. It was apparent in the halls of Congress, where lawmakers swapped strategies about how to contend with muscular interest groups looking to take them out.

The unusually intense December bustle is the product of this year's elections, where spending surged to $4 billion in sharp-edged campaigns across the country -- a record for a midterm.

Several veteran Democrats accustomed to winning reelection by lopsided margins went down in defeat -- partly because of the anti-incumbent mood of angry voters, but also because of the millions of dollars spent by outside groups in last-minute television ads.

Those who survived already are plotting how to deal with the attacks next time. There is no down time. Even the most entrenched incumbents -- including many Republicans, who could face left-leaning independent attacks in 2012 -- feel compelled to go into permanent campaign mode, further impinging on the already limited time lawmakers spend on policymaking and constituent service.

"It's a sad situation," said Rep. Maurice D. Hinchey of New York, a nine-term Democrat who came close to losing after facing more than $744,000 in independent attacks from outside conservative groups in the final weeks of the campaign. "This is destructive to the Democratic process, to the average American citizen, but we are going to have to pay more attention to fundraising."

Two years before the next national elections, it is clear that independent campaign money -- unleashed by the Supreme Court -- will wield even more influence in 2012.

Democratic and Republican operatives are racing to set up new "independent expenditure-only committees" that will allow them to spend money almost without limit to help their candidates, setting off a financial arms race.

"The obscene amount of money that was spent in this midterm, I think, is unfortunately just a harbinger of things to come," said Rep. Raul M. Grijalva (D-Ariz.), who narrowly won reelection last month after outside groups spent $600,000 in his rural district on ads attacking him in the final weeks of the campaign.

Grijalva, who enjoyed a 30-point advantage over his GOP rival in 2008, won by just 6 points this year, even after liberal allies poured in money to help him.

"We got caught flat-footed," he said. "I was watching an ad every 10 minutes on TV, even during 'Monday Night Football.' At some point, I didn't want to vote for myself."

Lawmakers say they fear the unrestricted independent spending is creating a Congress even more indebted to special interests, prone to gridlock and unlikely to find compromise. In a sign of the new order, a newly elected Republican senator, Wisconsin's Ron Johnson, paid a personal visit last week to U.S. Chamber of Commerce President Tom Donohue to thank him for the chamber's unsolicited support of his candidacy.

At the National Republican Congressional Committee, Chairman Pete Sessions of Texas is laying plans to ramp up fundraising for 2012 by setting benchmarks for all members of the GOP majority. Plans include giving every member a minimum fundraising threshold, with new, higher amounts set for incoming party chairmen.

"Economic interests are overwhelming the principle of one man, one vote," said Rep. Barney Frank of Massachusetts, the Democratic chairman of the House Financial Services Committee, who was outspent this fall by a previously unknown opponent and outside groups that ran ads attacking Frank. The only solution, short of legislation to overturn recent federal court rulings, Frank said, is "to raise more money on our side," even if the funds come from anonymous donors.

The Supreme Court widened opportunities for this spending in January, ruling in Citizens United vs. Federal Election Commission that corporations and unions could directly fund independent election ads. Other court and regulatory decisions made it easier for tax-exempt groups to air ads closer to election day paid for with unlimited and often anonymous donations.

Of the $4 billion spent overall, about $300 million came from nonparty independent groups, whose participation soared this year. Republicans benefited from the new legal environment more than Democrats, with conservative outside groups outspending liberal groups 2 to 1, according to the Center for Responsive Politics. Among the major outside spenders were the Crossroads Groups, the U.S. Chamber of Commerce and the American Federation of State, County and Municipal Employees.

Now the talk among Democratic lawmakers and their campaign advisors is how to create "our own Crossroads," a reference to two tax-exempt groups established in part by GOP strategist Karl Rove.

"I can sympathize with them, but I have no sympathy for them," said Carl Forti, political director for American Crossroads, a "super PAC" that discloses its donors, and Crossroads GPS, a nonprofit social welfare organization that accepts anonymous contributions.

Crossroads raised more than $70 million in 2010, but campaign finance lawyer Michael E. Toner, who advised several Republican presidential campaigns, anticipates that the two groups will spend more than $200 million in the next campaign cycle.

Democrats who vigorously protested the role played by independent campaigns now agree their party needs to compete better. Earlier in the decade, Democrats were pioneers in using these groups. This year, Republicans enjoyed a 2-1 advantage in outside spending.

"You're going to see a response on the Democratic side by allied groups and others to respond in kind," said Rep. Chris Van Hollen of Maryland, who was chairman of the Democratic Congressional Campaign Committee for 2010. "It seems like everybody wants to form their own [independent group] these days. I think it's a terrible new world. But I don't believe in unilateral disarmament either."

They don't have much time to gear up. Many GOP allies such as the Chamber of Commerce, Crossroad GPS and Americans for Prosperity already are planning to launch issue advertising and grass-roots campaigns in 2011.

"We are looking for opportunities," said Forti, who said part of the Crossroads group's aim would be to concentrate on issues next year that could undermine Democrats facing reelection in 2012.

The issue ads, which cannot explicitly call for the election or defeat of a candidate, are in part an effort by the groups to show that their work is not predominantly political, a requirement to maintain their tax-exempt status. But their push on issues such as tax cuts and deficit spending -- two issues Crossroads plans to focus on -- likely will heighten polarization around those debates and lay the groundwork for the 2012 battle.

That means for those facing reelection in 2012, raising campaign money is dominating the conversation and the calendar like never before.

Last week, lobbyists held multiple fundraisers every day and were swamped with invitations to elaborate and expensive gatherings in coming weeks.

"Not even Thanksgiving or Christmas after an election is off-limits anymore," lamented David DiMartino, a Washington political consultant. "For the small world of people who write checks to political campaigns, there no longer is an off-season. There is no lull. This is constant."

Although Republican candidates are bound to be hit by more attacks in the next cycle, many GOP leaders still argue that the independent expenditures are good for democracy.

"It encourages participation; it makes for a livelier debate," said Toner, the Republican campaign finance lawyer who once served on the Federal Election Commission.

Democrats -- even those who benefit from the spending -- take a dimmer view.

"I have a real fear that we're entering a nonstop campaign cycle," said Democratic media consultant Jim Margolis. "If you're in hyper-political state 365 days a year, it makes it tough to sit down and come to an agreement about where to go."